Aug 10 2018
Take the risk out of your Company’s Novated Leases
A novated lease provides heaps of benefits to employers and employees – save on tax, get great discounts on cars and related expenses and at no cost to the employer. But some things are too good to be true – there are risks to having a novated lease.
Repayments on a novated lease will continue even if an employee is made redundant or unable to work. However, this risk can be avoided with the right car insurance.
Many people understand the difference between market value and agreed value but fail to appreciate the consequences of being under-insured.
The most popular coverage is what insurers call market value sum insured. This pays out based on what the insurer deems to be the replacement value of the vehicle. An individual with a novated lease (or any other car under finance) should ensure that they are covered for the payout figure of the lease. This is the real risk that needs to be covered, not the replacement value of the vehicle.
We see many times when people get a new car under a novated lease and purchase the cheapest insurance without researching the best options. In short, these people may very well be under-insured. If your car is written off, then the finance needs to be paid out as well. The finance with the original vehicle does not roll over to the new car.
To reduce the risk of a novated lease, your insurance policy should be based on agreed value and include redundancy protection to ensure that you are not hit with a shortfall payment or unable to continue repayments. It is important to check the policy wording of the insurance you select to confirm this! This naturally provides peace of mind for the driver that should the unthinkable happen they would be in the best financial position possible.